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Prudential Eyes Growth as Part of Buffett Empire

Prudential Eyes Growth as Part of Buffett Empire

By DANIEL D. WILLIAMS

The owners of Prudential California Realty were looking for a buyer, and boy, did they find one.

As referred to last week in the Business Journal, the Del Mar-based real estate agency was snatched up by HomeServices Inc., a unit of MidAmerican Energy Holdings Co., itself part of Warren Buffett’s Berkshire Hathaway Inc.

While Buffett has a vacation home in Emerald Bay, the Oracle of Omaha didn’t have a direct hand in the deal, according Steve Games, founder and president of Prudential California.

Games and partners Nyda Jones-Church and John Aaroe were shopping their company when Games said he came across Ronald Peltier, chief executive of HomeServices, at an industry gathering. The two started talking and the deal grew from there, he said.

“I was looking for a capital source,” Games said. “For years, Prudential Insurance had helped us grow. But we had reached the limit of how they could support us. We were looking for something larger with the home market surging.”

Games built the franchise, a member of Prudential Real Estate Affiliates Inc., with an initial $15,000 in 1985. Relinquishing majority ownership doesn’t bother him, he said.

“They have a conservative Midwest mentality,” Games said of Edina, Minn.-based HomeServices. “They don’t buy things they don’t consider valuable. I don’t think they’ve ever sold anything they’ve bought.”

Prudential California’s partners retained a minority stake in the company and are set to continue running the operation, according to Games. The purchase price wasn’t disclosed.

Prudential expects to double in size in the next five years as a result of the deal, Games said. The company ranks as the nation’s fifth largest residential real estate agency by volume, amassing $13 billion in 2001 on 26,000 deals.

The company’s 85 offices and 3,100 agents stretch from Santa Barbara to Coronado, including some 20 in Orange County.

“We’re in every corner of Southern California, but we have room for expansion,” Games said.

The company has extended its use of the Prudential name until 2011, he said.

“The strength of ‘the rock’ is still in place,” Games said.

The buy provides a West Coast foothold for HomeServices, which owns several real estate agencies in the Midwest.

For Prudential, partnering with HomeServices levels the playing field, according to Games.

The agency had been dwarfed locally by NRT Inc., the nation’s largest residential real estate company and parent of Coldwell Banker, among others. NRT’s local agencies include Fred Sands Co. and Coast Newport.

“NRT has used economies of scale to consolidate,” said Pat Veling, president of Brea-based Real Data Strategies Inc., a real estate tracking firm. “This deal with Buffett allows for major competition. It deepens the pockets of Prudential, allowing the company to bid for other private real estate companies.”

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